Tag Archives: written contracts

Legal Contracts – If You Signed It, You Are Probably Stuck With It

Read it before you sign it

Legal Contracts are often binding

A. Lewis Ward helps consumers and business owners with legal contracts, other legal matters and avoiding legal mistakes

All too often I hear from people explaining how they are faced with a big problem, that they are being dumped on by a company or another party, and surely something should be done about it.

Many times, in actuality, the other party is within their legal rights because of a written legal contract signed by the person complaining. All too often, people sign documents that they do not read or that they do not understand, which can cause serious trouble!  Legally speaking, you are presumed to have read and understand any document or agreement that you sign.

Generally, it matters not that you did not read it or that you did not understand it. Therefore, if you have not read it or if you do not understand it, please do not sign. If you have a question about legal contracts, it may cost very little or nothing to simply pick up the telephone and ask an attorney to explain it to you.

This is not to say that you are always stuck with every legal contract you sign. There are legal concepts with fancy names such as fraud in the inducement, misrepresentation, mistake of law, and mistake of fact which can be and are employed to set aside legal contracts when the facts make it possible. There are also breaches of the contract – sometimes even anticipatory breaches – that might enable you to terminate a contract which you have signed. But, without these factors being present, you can usually be made to comply with an agreement that you signed or pay damages for your failure to do so.

When it comes to important transactions, I suggest that you get the document or contract in advance – these are often preprinted forms. In the privacy of your home or office, without being rushed, review the document or agreement. Although the wording may be somewhat difficult or strange, you should be able to figure out who is who in the agreement. But, there may be concepts or other terms which carry important legal significance which you do not understand. In that event, you should call an attorney for assistance. If you do not have the time and forethought to review an important document or agreement in this fashion, nevertheless read it before you sign it – even if it causes the other party to wait while you do so.

If it doesn’t feel right, don’t sign it!! Do not let being in a hurry or your enthusiasm to do this deal cloud your thinking. The delay and disappointment may be small relative to the damage you do to yourself.

What’s the Worst That Can Happen?

Improving Your Legal Health

Your legal health in contract agreementsIn any matter that will have a substantial impact on your life or livelihood, ask yourself “What is the worst thing that can happen and how do I prepare for it?” Do whatever is necessary to make this habitual. It is the first step toward your legal health. In this true story, my friend and client suffered a $1 million loss, which was worse than anything he had imagined happening to him.

I received a call from my entrepreneur client saying he needed help immediately because his company had developed a software program that had been stolen and it was going to cost the company approximately $800,000.00 over the next three to five years. His company had invested about $150,000.00 developing this software that was expected to be very popular in the theft identity/identity restoration arena. They had entered into a confidentiality and nondisclosure agreement with a nationally-known security company. His partner had worked with the security company lawyers to prepare a marketing agreement, which was related to the agreement concerning the development of the program; and the company was to be the exclusive representative of the security company to sell and distribute the software to banks. However, on a recent visit to his bank, he had seen documents which were a mirror image of the program he and his company had developed.

Unfortunately, I also learned that this company did not seek the advice of an attorney in preparing the written agreements with the national security firm. The terms and provisions of the marketing agreement were very heavily weighted in favor of the security company, whose lawyers prepared the agreements.

These gentlemen had exhausted their resources developing the software program and had no funds left to pay an attorney to seek redress. Conversely, the probability of success and the amount known to be in controversy was not sufficient to motivate a good attorney to pursue their rights and pay all expenses on a contingency fee basis. Combining the $150,000.00 they invested in development of the program with the $800,000.00 they anticipated earning during the next three to five years adds up to a total loss of about $950,000.00 — a very expensive mistake!

These entrepreneurs made two serious mistakes:

  • they did not admit to themselves that they were ignorant about the legalities of protecting themselves and
  • they “got into bed” with the other party’s attorneys and trusted them, something entrepreneurs — nor you — should ever do!

How much do you think it may have cost to employ an attorney for assistance with the legal agreements? And how much do you think that attorney’s advice would have been worth? In this case, it would have been worth a million dollars.

Admitting your ignorance of how to protect yourself is the first step towards better legal health. The next step is to never trust the other party or his attorney to protect your interest.

Read more about Your Legal Health

Written vs. Oral Contracts In Business Law

Many Oral Contracts May Be Binding, But Take Precautions

There are certain contracts that must be in writing to be enforceable: a contract concerning an interest in real property; an agreement to stand good for the debt or obligation of another person; and an agreement to perform any act or service which cannot be performed within one year or less. Otherwise, oral contracts are usually enforceable. But, oral contracts can present enforcement problems, as illustrated by these true stories.

The Compaq Controversy

A few years ago I was asked to assist in developing a contract to be used in doing business with Compaq Computer Corporation (this was before Compaq was bought by HP). My client had left his salaried position, gone into business for himself, and was anxious to get this project from Compaq. After preparing a simple contract for him I did not hear back for several months. Then, one day he calls and tells me how the written contract was submitted but Compaq never signed it. He had been so interested in adding a feather to his cap he proceeded doing business with Compaq on a verbal basis. The project had a tight deadline and he put a blood and guts effort into the project and incured substantial payables getting it finished. After he successfully completed the project, Compaq refused to pay his final invoice.

This put him in a very bad situation. He owed close to $70,000.00 to subcontractors who had worked on credit based upon their trust and belief in him. Furthermore, there was nothing to compensate himself for all of the many weeks that he spent working on the project. Can you say STRESS?!

Upon review, we discerned that Compaq’s key personnel had been guilty of misrepresentation and fraud in dealing with my client. The agreement was not one that the statute of fraud required to be in writing to be enforceable. When Compaq responded to my demand letter by offering a small fraction of the amount due, we filed a lawsuit. That lawsuit was a full blown “fight to the death” kind of controversy with Compaq, which of course, was represented by a large defense firm here in Houston. After working on the case for 18 months, attorney’s fees had reached about $90,000.00. And even though Compaq’s attorneys had declared they would never agree pay more than $75,000.00 to settle the case, they realized we were serious about trying the case and finally settled just prior to trial.

Although my client made an informed decision to settle instead of trying the case, after paying litigation expenses, attorney’s fees and the subcontractors he owed, there was little left for him, personally. Even though he won, he lost!

An Expensive Mistake

A second story which illustrates the difficulties and expenses which can arise out of not using a written agreement is a case which was recently completed.

Although my client had a preprinted proposal which a prospective customer may sign and convert the proposal into a written contract, he did not use it this time. The homeowner made a down payment and my client installed a nice fence on the homeowner’s property. But, when he went to collect the balance of money due for labor and materials, the homeowner claimed that my client was mistaken about the terms and provisions of their verbal agreement. The homeowner argued that he only owed a small part of the balance due, and then refused to pay even that.

My client came to me and we sent a demand letter, which was ignored. A lawsuit was filed to collect about $2,000.00 and you would think it involved a federal question. The parties have engaged in discovery and my attorney’s fees have far exceeded the original $2,000.00.

Although he prevailed, in the final analysis my client was not a “winner.” Look at the stress and lost production he suffered because he failed to put a simple agreement in writing.

Of course, the moral in both of these stories is to get the agreement in writing. Difficulties definitely arise as a practical matter with oral contracts because controversy frequently develops over the terms of the parties’ agreement. Although litigation still happens when written contracts are used, the controversy usually evolves around disputed facts or the meaning of particular words.

Improving Your Legal Health

Four steps to improve your legal health

Many times, in discussing political elections or current affairs, we accuse our fellow countrymen of not thinking and being too ready to believe what they are told. This is also applicable to the legal aspects of our daily lives. As a consequence, we may suffer distress and even economic loss that are not necessary.

Therefore, I’d like to provide you with advice and real life examples that will help you lead a more healthy legal life, and hopefully save you lots of money and stress.

This Legal Health Blog will be provided in four installments:

Written vs. Oral Contracts

Even though oral contracts are enforceable in some cases, they can present enforcement problems, as illustrated by these true stories. Don’t risk the stress and financial loss described in these two stories: written versus oral contracts.

What’s the Worst that Can Happen?

In any matter that will have a substantial impact on your life or livelihood, ask yourself, “What is the worse thing that can happen and how do I prepare for it?” Do whatever is necessary to make this habitual. In this true story, my friend and client suffered a $1 million loss: the worst that can happen.

Cite Your Authority

Too often, we feel ready to accept what we are told is the “company policy” or “that’s the way we always do things,” when in fact a company has no legal authority or basis for its decision. This one simple request may save you money and stress: cite your authority.

If You Signed It, You’re Probably Stuck With It

Also too often, people sign written contacts that they have not read and don’t understand. This can cause serious trouble! Legally speaking, you are presumed to have read and understand any written contract that you sign. Read more about how to protect your self:  regarding written contracts, if you signed it, you’re probably stuck with it.

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